Posts Tagged: "Oil States v. Greene’s Energy Group"

Since the Supreme Court upheld the constitutionality of inter partes review (IPR) a little more than a year ago in Oil States, several patent owners have brought other constitutional challenges to America Invents Act (AIA) trial proceedings. These cases have been slowly percolating at the Patent Trial and Appeal Board (PTAB), the U.S. Court of Federal Claims, and the U.S. Court of Appeals for the Federal Circuit. In many cases, however, the Federal Circuit has declined to address these constitutional claims on the merits, finding them unnecessary to resolve or insufficiently developed by the parties. But early last week, the Federal Circuit for the first time addressed the applicability of the Takings Clause of the Fifth Amendment to IPRs, holding in Celgene Corp. v. Peter, Case No. 18-1167 (Fed. Cir. 2019) “that the retroactive application of IPR proceedings to pre-AIA patents is not an unconstitutional taking under the Fifth Amendment.” While the court’s holding may appear on its face to forestall current and future Takings Clause challenges to AIA proceedings, its analysis leaves some questions unanswered, and may even provide a narrow path forward for future takings claims. Furthermore, given the Supreme Court’s predilection for addressing both AIA and Takings Clause issues, the Federal Circuit panel’s decision may not be the last word on this interesting issue.   

In Iancu v. Brunetti (Case No. 18-302), the United States Patent and Trademark Office (USPTO) is appealing to the Supreme Court from a U.S. Court of Appeals for the Federal Circuit decision that held the Lanham Act’s prohibition on “immoral” or “scandalous” marks violates the First Amendment’s free speech clause. The case is the second in two years that the High Court has taken on the subject, and was argued on Monday, April 15. The federal government’s petition specifically asks the Court to consider “whether Section 1052(a) [of the Lanham Act]’s prohibition on the federal registration of ‘immoral’ or ‘scandalous’ marks is facially invalid under the Free Speech Clause of the First Amendment.” At issue is Erik Brunetti’s FUCT trademark for clothing, which was refused in 2011 because it was considered a scandalous term under Section 1052(a) of the Lanham Act.According to the report from Monday’s hearing, the justices’ line of questioning indicated they are likely to follow their own lead in Matal v. Tam, which struck down the disparagement clause of the Lanham Act, by likewise striking down the restriction on federal registration of trademarks that are “immoral or scandalous” on First Amendment grounds. But, according to most observers, they are likely to take a relatively cautious approach in doing so. As is customary, IPWatchdog reached out to industry experts for some additional views on the hearing.

There is near unanimity that the Supreme Court’s decisions in Oil States Energy v. Greene’s Energy Group, 138 S.Ct. 1365 (2018) was among the most significant events of the year. Several also point to the Federal Circuit’s decisions in Berkheimer v. HP Inc., 881 F.3d 1360 (Fed. Cir. 2018) and Aatrix Software v. Green Shades Software, 882 F.3d 1121 (Fed. Cir. 2018), the impact Director Iancu has had on the USPTO and the patent system, and Congress passing the The Music Modernization Act. Beyond those events, there were others identified by this diverse panel that might have gone unnoticed if we were to focus only on the top-line events of the year.

Before proceeding it is worth noting two things. First, that my list focuses on specific and identifiable events. Second, there are a number of stories worth mentioning, but which just missed the cut for one reason or another. The two that will probably be most glaring omissions are the Federal Circuit’s decision in Vanda Pharmaceuticals v. Westward Pharmaceuticals, 887 F.3d 1117 (Fed. Cir. 2018), and the final rules implementing the Phillips claim construction standard. With respect to Vanda, while it is a pro-patent decision, the claims found eligible are virtually indistinguishable from those held ineligible in Mayo, so it seems virtually certain a different panel of the Federal Circuit would have ruled differently. Thus, all Vanda did was seem to create uncertainty, which may be good for settlements, but likely not a repeatable decision. As for the Phillips standard, while it makes perfect sense for the PTAB to be using the same claim construction standard as used in federal district courts, many have questioned whether it will make any real difference in outcomes. Still, it is a big event and would have been 11th on my list. Had a chance to Phillips been accompanied by patent claims being presumed valid and requiring clear and convincing evidence to be declared invalid at the PTAB, that would certainly be worthy of top 10 inclusion. Alas, that would require an amendment to the statute and beyond the powers of Director Iancu. Thus, the banishment of BRI, while important, finds itself on the outside looking just in at this year’s top 10.

As we look ahead towards 2019, it is worth reflecting on several high-profile patent cases and brewing developments from the past year. Here are five lessons we learned from 2018 that may be useful in developing IP litigation strategies in 2019.

Despite potentially relevant Supreme Court precedent in Thomas and Granfinanciera, the better view under the weight of Supreme Court precedent with respect to patent validity, absent the recent decision by the Court in Oil States, is that determination of the validity of issued patents does not include the government as a party and, therefore, only private rights are involved.  Jurisdiction should, therefore, be solely within Article III, and preclude final determinations of patent validity as they currently exist under the AIA, as well as other post-issuance adjudication, such as interference proceedings and ex parte reexamination.  Statutory provisions for post-grant examination at the Patent Office should be limited to an advisory capacity as an adjunct to a federal district court and address only issues of fact.  Such factual determinations coming from the Patent Office should be subject to review for substantial evidence by a district court in order to pass constitutional muster under Article III. However, given that issued patents are deemed to be “public rights” and that IPRs have been upheld as constitutionally valid under Oil States, there may be no limit to the power Congress can grant to the Patent Office over the validity of patents, potentially usurping any role for the judiciary in this regard under Article III.

Capella Photonics, Inc. has filed a petition for certiorari arguing that the Federal Circuit’s practice of issuing judgments without opinion pursuant to Federal Circuit Rule 36 in appeals from the Patent Trial and Appeal Board violates 35 U.S.C. § 144, which provides that the Federal Circuit “shall issue . . . its mandate and opinion” to the PTO in such appeals. 

In early August, patent owner Smartflash filed a petition for a writ of certiorari with the U.S. Supreme Court to appeal a case stemming from covered business method (CBM) review proceedings carried out at the Patent Trial and Appeal Board (PTAB). Smartflash is asking the Supreme Court to decide whether PTAB administrative patent judges (APJs) are principal officers of the United States who are subject to the terms of the Appointment Clause, whether CBM review of patents disclosed prior to passage of the America Invents Act (AIA) violates the Fifth Amendment’s Due Process Clause, and whether undisputed evidence that an invention is not unduly preemptive is relevant to answer questions of patent eligibility under 35 U.S.C. § 101. At issue in this petition are a total of 30 CBM reviews petitioned by Apple, Samsung and Google against Smartflash, which were instituted by APJ panels at the PTAB.

While the goal of developing a US innovation policy bolstered by strong IP protections was the focus of the event it was clear that competition with China, who clearly has set their own innovation agenda on a country-wide level, created a clear sense of urgency in the discussions… Generally speaking, the panelists felt that the actions of the last few years had inflicted serious damage on the reliability of patent rights in the US and created substantial doubt about what those rights were worth economically with the changes. The panel was overwhelmingly in favor of making significant changes to the current environment especially with regard to the proceeding at the PTAB.

The word franchise is defined as an authorization granted by a government or company to an individual or group enabling them to carry out specified commercial activities… A patent is an exclusive right by nature. A patent does not give anyone the right to do anything other than to exclude someone else from doing something… So how then can a patent be a grant from the government to carry out specified commercial activities? That is simply not what a patent is, it is not what the statute says, it is not the grant provided to the patentee. To put it point blank, the Supreme Court has fundamentally altered the nature of the patent grant without reason or authority.

One week ago, the United States Supreme Court issued two decisions pertaining to inter partes review (IPR) challenges at the Patent Trial and Appeal Board (PTAB). Meanwhile, the United States Patent and Trademark Office has issued fresh patent eligibility guidance thanks to the Federal Circuit’s recent decision in Berkheimer v. HP. Join Gene Quinn and Todd Dickinson, former USPTO Director and current Senior Partner at Polsinelli, on Thursday, May 3, 2018, at 12pm EST, for a free webinar.

That being said, and following up on the feeling of “doom and gloom” many of us had upon initial issuance of the Oil States decision, there is some reason for hope here in at least reigning in some of the impact of IPRs. The majority opinion concludes by “emphasiz[ing] the narrowness of [its] holding,” i.e., it only addresses the 7th Amendment and Article III challenges. Or as I’ve characterized this portion of the majority opinion, it suggests the wrong questions were asked by Oil States. Instead, it suggests Oil States should have asked the following questions: (1) was retroactive application of IPRs proper, even though that procedure was not in place when Oil States’ patent issued?; and (2) may IPRs be challenged on “due process” and “takings clause” grounds (stating that “our decision should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause”). With reference to the second question, note in particular that the majority cited the Florida Prepaid case which relates to 11th Amendment sovereign immunity of the states and their institutions. That citation has direct implications in the University of Minnesota’s appeal to the Federal Circuit of PTAB’s ruling (wrong in my view and others) in the Ericsson decision that state institutions (such as state universities) waive their 11th Amendment sovereign immunity in IPRs if they have brought a separate patent infringement suit in federal district court.

Oil States v Greene’s Energy, 584 U.S. ___ (2018), just decided that patents are a public right, a franchise right, akin to a right to erect a toll bridge, and not personal property (slip op. at 9).  What was unfortunately never addressed in Oil States, and which the court specifically left the door open for, was that patents rights are still property rights for the purpose of Due Process–the inference being that IPRs may fail under the Due Process or Takings Clause.  Indeed the court seemed to lament that Oil States did not challenge the retroactive application of IPRs and their constitutional sufficiency on a broader basis. 

Earlier today the United States Supreme Court issued its decision in Oil States v. Green Energy, finding that inter partes review is constitutional both under Article III and the Seventh Amendment to the United States Constitution. In a 7-2 decision, the Court determined that patents are a government franchise that are subject to review by the Patent Office even after granting, and can be revoked at any time.  In order to get a diverse array of views, we held open comments through early evening for this instant reaction piece.